Participation in insolvency or restructuring proceedings requires commitment, knowing one's obligations and the tools available to fulfil them. One of the basic principles of law states "ignorantia iuris nocet" Which means 'ignorance of the law harms'. Therefore, with this article we continue our series in which we will gradually introduce our readers to who is who in restructuring and insolvency proceedings.
Official Receiver in Bankruptcy
Can insolvency proceedings be conducted without a Receiver?
Both insolvency proceedings - bankruptcy - and the person of the Receiver are shrouded in disrepute. They are often demonised and associated with finality. But are they really? Is it possible to conduct insolvency proceedings without a Receiver?
Who is the Syndic?
To put it simply – the trustee is the body of bankruptcy proceedings. The trustee is appointed by the Court in the decision on the declaration of bankruptcy. Therefore, his function is performed from the date of declaration of bankruptcy until the end of the bankruptcy proceedings.
In the case of the bankruptcy of a trader, the court may, before appointing a receiver, appoint a provisional court supervisor who will later take on the role of receiver.
Who can become a Syndic?
A receiver may be a person who has the relevant qualifications i.e. has a license restructuring adviser and a commercial company whose partners who are liable for the company's obligations without limitation with all their assets or members of the management board representing the company hold a restructuring advisor license.
Article 156 [Appointment of receiver].
4. The trustee shall promptly, no later than upon taking the first action before the court or judge-commissioner, file in the case file a document confirming the conclusion of a civil liability insurance contract for damages caused in connection with the performance of the function. The costs of insurance do not constitute costs of bankruptcy proceedings and are not subject to reimbursement from the bankruptcy estate.
The role of the Receiver in insolvency proceedings
The concept of managing the bankrupt's assets is very vague, and the trustee's liability is far greater than it may initially appear, as it is the trustee who ensures that the insolvency proceedings are conducted efficiently. We can distinguish some of the basic duties of the trustee;
- taking possession of the bankrupt's assets, managing them and securing them against destruction or damage,
- liquidation of the bankrupt's assets constituting the bankruptcy estate,
- drawing up a list of claims,
- search for the bankrupt's assets,
- recovery of the bankrupt's assets - ineffective acts of the bankrupt,
- drawing up a plan for the distribution of the funds of the bankruptcy estate,
- preparation of separate plans for the distribution of funds obtained from the disposal of the security asset,
- preparation of a draft creditor repayment plan – applies consumer bankruptcy.
- Submission of activity and accounting reports
Of course, since the purpose the purpose of bankruptcy proceedings is to satisfy creditors to the greatest extent possible, The trustee's greatest responsibility - as well as the most important stage of bankruptcy proceedings - is the liquidation of the bankrupt's assets. Pursuant to Article 311 of the Bankruptcy Law, the liquidation of the bankrupt's assets may take place in several ways:
- Negotiated sale
- Sale by tender or share
- Collection of debts from debtors of the bankruptcy estate
The trustee may also operate the bankrupt's business after the declaration of bankruptcy in justified cases if the trustee considers that an arrangement with creditors is possible or the sale of the business as a whole or its organised parts is possible.
Distribution of funds of the insolvency estate
The last stage of the insolvency proceedings, and one of the last duties of the Receiver, is to distribute the funds accumulated in the bankruptcy account to the creditors in accordance with the provisions of the Bankruptcy Law. To distribute the funds, the trustee draws up a plan for the distribution of the funds of the bankruptcy estate. Creditors in bankruptcy proceedings are satisfied in a strictly defined order. The legislator has introduced a regulation that tells us in which order claims should be satisfied.
At this point, it should be emphasised that only after one category has been fully satisfied does the legislator allow the next category to be satisfied. Thus, creditors of the second category will only be able to obtain funds after the first category has been satisfied, creditors of the third category will only obtain funds after the creditors of the second category have been satisfied, etc. Of course, creditors of subsequent categories will be satisfied if there are funds left in the bankruptcy estate after the previous category has been satisfied.
Article 342. [Categories of receivables]
(1) Receivables to be satisfied from the funds of the bankruptcy estate shall be divided into the following categories:
1) first category - claims arising from employment relationships, except for claims arising from the remuneration of the representative of the bankrupt or the remuneration of a person involved in the administration or supervision of the bankrupt's undertaking, farmers' claims arising from contracts for the provision of products from their own agricultural holding, maintenance claims and annuities due to the compensation for illness, incapacity to work, disability or death and annuities due to the conversion of rights covered by the right of life into an annuity, falling for the last three years before the declaration of bankruptcy receivables due to social security contributions within the meaning of Laws of 13 October 1998 on the social security system (Journal of Laws of 2024, item 497) and receivables arising in the restructuring proceedings from the acts of an administrator or receivables arising from the debtor's acts performed after the opening of restructuring proceedings which do not require an authorisation from the council of creditors or the consent of a court supervisor or which were performed with the authorisation of the council of creditors or the consent of a court supervisor, if the bankruptcy was declared as a result of the examination of a simplified bankruptcy petition, as well as receivables from credit, loan, bonds, guarantees or letters of credit or other financing provided for in the arrangement adopted in the course of restructuring proceedings and granted in connection with the performance of such an arrangement, if bankruptcy has been declared as a result of the examination of an application for bankruptcy filed no later than three months after the arrangement has been validly annulled;
2) second category - other receivables if they are not covered by other categories, in particular taxes and other public levies and other social security contributions;
3) third category - interest on receivables included in the higher categories in the order in which the principal is satisfied, as well as judicial and administrative fines and receivables from donations and legacies;
4) fourth category - receivables of the shareholders from a loan or other legal transaction of similar effect, in particular the delivery of goods on deferred payment, made to the bankrupt being a capital company within five years before the declaration of bankruptcy, together with interest.
There is also a so-called zero category, i.e. specific types of claims that must be satisfied before funds can be distributed to creditors. They are not regulated in the aforementioned article, but the Bankruptcy Law itself grants them a special status and these liabilities must be satisfied first.
At the outset, the costs of the proceedings themselves are satisfied. This includes all expenses related to the actions of the receiver to prepare the company for closure, including the receiver's remuneration.
If, after costs and expenses have been met insolvency proceedings will have any means left, the so-called liabilities of the bankruptcy estate are satisfied under them. They include all those liabilities that have already been incurred after the bankruptcy, in particular remuneration for work after the bankruptcy, unjust enrichment of the mass or others.
The last category of claims, on which special regulations apply are claims secured by mortgage, pledge, registered pledge, fiscal pledge or maritime mortgage and certain rights and the effects of disclosure of rights.
The provisions on pledge also apply mutatis mutandis to the transfer of security.
In the event of liquidation of such an item, the secured party shall be satisfied first. The limit, however, is the amount obtained from the sale, less the costs of such liquidation.
After the final distribution of the bankruptcy estate funds or the satisfaction of all creditors in full The court declares the proceedings closed bankruptcy. After the conclusion of the proceedings, the function of the trustee expires.
Summary
The trustee plays a key role in bankruptcy proceedings and it is impossible to conduct the proceedings without the trustee. The numerous duties and competences of the Trustee allow for efficient problem solving, which both entrepreneurs and consumers struggle with. Bankruptcy is a procedure thanks to which people and entities in financial difficulties can obtain debt relief and continue to function without fear of being haunted by ghosts from the past. If you are interested in this article, follow our publications on the website https://pmr-restrukturyzacje.pl and our social media accounts. We will soon be inviting you to read our next article, which will answer the question 'Who is who in the restructuring proceedings and bankruptcy".
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